Coordination Frictions and Economic Growth

Gabrovski, Miroslav (2017): Coordination Frictions and Economic Growth.

Abstract

In practice, firms face a mass of scarce innovation projects. They choose a particular research avenue towards which to direct their effort, but do not coordinate these choices. This gives rise to coordination frictions. Our paper develops an expanding-variety endogenous growth model to study the impact of these frictions on the economy. The coordination failure generates a mass of foregone innovation and reduces the economy-wide research intensity. Both of these effects decrease the growth rate. Because of this, the frictions also amplify the fraction of wasteful simultaneous innovation. A numerical exercise suggests that the impact of coordination frictions on both the growth rate and welfare is substantial. This paper also analyzes firm-level data on patents which provide an estimate of the severity of the coordination problems and further evidence in favor of the hypothesis that research avenues are scarce.

• Item Type: MPRA Paper
• Language: English
• Keywords: Growth; Frictions; Coordination; Simultaneous Innovation; Search for Ideas
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O30 - General; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O32 - Management of Technological Innovation and R&D; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General

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